IDEAS home Printed from
   My bibliography  Save this paper

Public Infrastructures, Production Organizations, and Economic Development


  • Kohei Daido

    () (School of Economics, Kwansei Gakuin University)

  • Ken Tabata

    () (School of Economics, Kwansei Gakuin University)


We develop a political economy model of growth to examine economic development led by the interactions between an economic decision concerning a firm’s production technology (CRS vs IRS technology) and a political decision concerning public infrastructures. We show that multiple equilibrium growth paths occur due to differences in expectations regarding the quality of public infrastructures. These multiple paths illustrate why economies with poor initial conditions can catch up to and, furthermore, overtake economies with better initial conditions. Our result could explain the experiences of some East Asian countries where co-evolutions of public infrastructures and industrial transformations spurred economic development.

Suggested Citation

  • Kohei Daido & Ken Tabata, 2012. "Public Infrastructures, Production Organizations, and Economic Development," Discussion Paper Series 93, School of Economics, Kwansei Gakuin University, revised Aug 2012.
  • Handle: RePEc:kgu:wpaper:93

    Download full text from publisher

    File URL:
    File Function: First version, 2012
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
    2. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    3. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    4. Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 701-729, June.
    5. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2002. "Courts: the Lex Mundi Project," NBER Working Papers 8890, National Bureau of Economic Research, Inc.
    6. Luc Laeven & Christopher Woodruff, 2007. "The Quality of the Legal System, Firm Ownership, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 601-614, November.
    7. Agénor, Pierre-Richard, 2010. "A theory of infrastructure-led development," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 932-950, May.
    8. Rodrik, Dani, 2005. "Growth Strategies," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 14, pages 967-1014 Elsevier.
    9. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    10. Jeffrey P. Cohen & Catherine J. Morrison Paul, 2004. "Public Infrastructure Investment, Interstate Spatial Spillovers, and Manufacturing Costs," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 551-560, May.
    11. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
    12. Wang, Ping & Xie, Danyang, 2004. "Activation of a modern industry," Journal of Development Economics, Elsevier, vol. 74(2), pages 393-410, August.
    13. María Teresa Ramírez & Hadi Salehi Esfahani, 1999. "Infrastructure and Economic Growth," Borradores de Economia 123, Banco de la Republica de Colombia.
    14. Sturm, Jan-Egbert, 2001. "Determinants of public capital spending in less-developed countries," CCSO Working Papers 200107, University of Groningen, CCSO Centre for Economic Research.
    15. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    16. Chakraborty Shankha & Dabla-Norris Era, 2011. "The Quality of Public Investment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-29, August.
    17. Randolph, Susan*Bogetic, Zeljko*Hefley, Dennis, 1996. "Determinants of public expenditure on infrastructure : transportation and communication," Policy Research Working Paper Series 1661, The World Bank.
    18. Thorsten Beck & Asli Demirguc-Kunt, 2005. "Law and Firms' Access to Finance," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 211-252.
    19. Acemoglu, Daron & Robinson, James A., 2006. "Economic Backwardness in Political Perspective," American Political Science Review, Cambridge University Press, vol. 100(01), pages 115-131, February.
    20. Saint Paul, Gilles & Verdier, Thierry, 1997. "Power, Distributive Conflicts, and Multiple Growth Paths," Journal of Economic Growth, Springer, vol. 2(2), pages 155-168, July.
    21. Charles R. Hulten & Esra Bennathan & Sylaja Srinivasan, 2006. "Infrastructure, Externalities, and Economic Development: A Study of the Indian Manufacturing Industry," World Bank Economic Review, World Bank Group, vol. 20(2), pages 291-308.
    22. Beck, Thorsten, 2010. "Legal Institutions and Economic Development," CEPR Discussion Papers 8139, C.E.P.R. Discussion Papers.
    23. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction and Firm Organization Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1201-1237.
    24. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
    25. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February.
    26. Glomm, Gerhard & Ravikumar, B., 1996. "Endogenous public policy and multiple equilibria," European Journal of Political Economy, Elsevier, vol. 11(4), pages 653-662, April.
    27. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, vol. 70(2), pages 443-477, April.
    28. repec:dgr:rugccs:200107 is not listed on IDEAS
    29. Agenor, Pierre-Richard & Moreno-Dodson, Blanca, 2006. "Public infrastructure and growth : new channels and policy implications," Policy Research Working Paper Series 4064, The World Bank.
    30. Straub, Stephane & Vellutini, Charles & Warlters, Michael, 2008. "Infrastructure and economic growth in East Asia," Policy Research Working Paper Series 4589, The World Bank.
    31. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pierre-Richard Agénor & Baris Alpaslan, 2014. "Infrastructure and Industrial Development with Endogenous Skill Acquisition," Centre for Growth and Business Cycle Research Discussion Paper Series 195, Economics, The Univeristy of Manchester.
    2. repec:bpj:glecon:v:17:y:2017:i:1:p:26:n:6 is not listed on IDEAS
    3. repec:exl:25engi:v:28:y:2017:i:3:p:240-252 is not listed on IDEAS

    More about this item


    Public Infrastructure; Political Economy; Production Organization; Overlapping Generations Model;

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kgu:wpaper:93. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toshihiro Okada) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.